Too good to be truthful: Why competent advisers are fired

C. Schottmuller

    Research output: Working paperDiscussion paperOther research output

    Abstract

    A decision maker repeatedly asks an adviser for advice. The adviser is either competent or incompetent and his preferences are not perfectly aligned with the decision maker's preferences. Over time the decision maker learns about the adviser's type and fires him if he is likely to be incompetent. If the adviser's reputation for being competent improves, it is more attractive for him to push his own agenda because he is less likely to be fired for incompetence. Consequently, competent advisers are also fired with positive probability. Firing is least likely if the decision maker is unsure about the adviser's type.
    Original languageEnglish
    Number of pages31
    Publication statusPublished - 12 Sep 2016

    Publication series

    NameTILEC Discussion Paper
    Volume2016-007

    Keywords

    • advice
    • cheap talk
    • reputation

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